MAGAZINE: Ikea moves into redevelopment

Plans by Ingka Centres to double its portfolio of Ikea-anchored shopping centres over the next five years will see the group develop smaller formats in city centres.

Ikea is known for its out-of-town superstores where shoppers can buy everything they need under one roof.  But now the Swedish giant is moving into inner cities, as well as updating its global portfolio of shopping centres.

As managing director of Ingka Centres, Gerard Groener heads up a property portfolio which is part of the Ikea superstore family.  He controls over three million m2 of retail space spread throughout Europe, Russia and China. The square metres are to be found in 44 shopping centres which are anchored by an Ikea store and home to 7,000 shops and 1,600 brands. The shopping centres cover the whole retail gamut, from fashion to supermarkets and the portfolio has a market value of some €10 bn.

‘In terms of market value, it is a little more than I was used to with Corio,’ says Groener, who headed up the Dutch retail investor for seven years. Today Groener is involved with the rest of the world but not with the Netherlands. Ingka Centres does not own any property in his home country. ‘I travel a lot and I am rarely found at our headquarters in Leiden,’ he says.

Groener’s challenge is to almost double the size of the Ingka Centres portfolio in five years. Some of the 44 shopping centres will be redeveloped, new centres are in the pipeline and more are envisaged in the future.

A new departure, however, is the decision to place Ikea Retail branches in city centres. ‘We have to, because that is where our public are going,’  Groener says. ‘People don’t want to waste time driving for two hours to buy something that they can order online.’

Three-year investment programme
Ingka Centres plans to invest €5.8 bn over the coming three years, in both inner city and peripheral locations. The aim is to have 70 locations by 2025 and to more than double the annual number of visitors to one billion.

‘The Ikea store is crucial to our meeting places and a key part of our approach to the future,’ Groener says.  ‘Ingka Centres and all our partners benefit from the Ikea store, and the Ikea store benefits from the opportunity of being where many people meet.’ Now that Ikea Retail has decided that there should also be shops in city centres, property development will have a larger role. Inner city locations are often in the hands of local players and that makes it difficult to buy them. In addition, the floor space that Ikea is after is often hard in city locations.

The smaller formats are already being tested. For the past year there has been an Ikea kitchen shop in the centre of Stockholm and a sitting and bedroom concept in Madrid. In London a design studio for kitchens and bedrooms has been opened. Mid-2019 a 5,000 m2 Ikea store will open on the boulevard La Madeleine in Paris where shoppers can select what they want to buy and it will be delivered to their homes from an out of town warehouse.

In Paris Ikea has taken over space vacated by low-end fashion retailer C&A, thereby benefiting from the ongoing shift in the retail market. Ingka Centres has allocated €3 bn for the inner city expansion programme and 30 cities across the globe have been earmarked for action. In Europe major cities, like Paris, London, Rome, Madrid, Milan and Berlin are on the top priority list.

Meeting places
The inner cities are not the only locations where Ikea is taking advantage of the changing shape of retail. Ingka Centres is also focusing on new shopping centres and giving them more of a role as meeting places. In China, Ingka Centres has opened three, including one of the biggest in its portfolio – the 210,000 m2 Livat Beijing.  Three more are in the pipeline. ‘We are also busy in India with the plans for three projects,’ says Groener. ‘This is a new market for us.’ Russia is also on the hit list.

‘A good example of what we are doing is the Mega Dybenko shopping centre near St Petersburg,’ Groener says. ‘There we have a large park where we have been organising events together with local communities and which are attracting big audiences. We are also working on edutainment together with schools, something which is seen as very important in China, for example.’

Existing shopping centres are also in for an overhaul. ‘Lots of them need revitalizing to stay relevant for customers in the future,’ Groener says. ‘We used to position Ikea as the big draw at the end of the centre but now we have noticed that visitor numbers increase considerably if we place an Ikea in the heart. Between 50% and 60% of shoppers enter an Ikea if it is in a mid location.’

Retail parks which could not be developed into a meeting place have already been sold off. In 2017, Pradera bought 25 retail parks for €900 mln and Savills has bought four in Scandinavia. That has brought in enough cash for Ingka Centres to realise its ambitions. ‘The Ingka corporate structure means profits stay within the company and are reinvested. We are financially independent,’ says Groener.

A complicated organisational structure
Ingka Centres is part of the giant Ikea conglomerate. The global retail group is known to the public as simply Ikea but is, in fact, made up of two separate holding companies. Ingka Group, owned by the Ingka Foundation, is based in Leiden. It is made up of three units: Ingka Centres, which runs the property portfolio; Ikea Retail, which runs 360 plus Ikea stores; and Ingka Investments, which puts its money into activities which generate value for other Ingka businesses like renewable energy, forestation and recycling. Thanks to these sustainable energy activities, Ingka will be climate-positive by 2030.

In 2018, Ingka Group booked turnover of € 34.8 bn on its retail activities, a rise of 4.7% on 2017.

Ikea Retail is a franchisee for the Ikea concept, that is owned by the other holding, Inter Ikea, and which is based in Delft. Inter Ikea owns the Ikea formula which is used all over the world, but not just by Ikea Retail. Ikea Retail is the biggest franchisee, with over 360 stores but there are some 10 other franchisees based in different countries, including Saudi Arabia.

Personal profile
Gerard Groener has worked for Ingka Centres since 2015 and has been managing director since 2016. He is also on the board of Ingka Holding. Prior to joining Ikea, Groener spent 20 years working for listed property group Corio and its predecessor WBN including a seven-year spell as CEO. Groener is also a non-executive director of the Triodos Vastgoed Fonds.



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